Korean Won at Lowest since 2005

The South Korean won declined to its lowest level since November 2005, as the country’s central bank said that the weaker currency will be helping against the economic stagnation.

The Bank of Korea decided to leave the interest rate unchanged at 5 percent points today as the inflation prevented using monetary policy easing to decrease the money cost and bust spending. This decision helped the Korean won to drop from 1033.3 to 1044.9 on Forex today.

Won is the worst performing world major currency this year. Like the other Asian free-traded currencies it’s being pulled down by high oil prices and the current account deficit spurred by the lack of financial liquidity.

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Bank of America Confident on INR Growth

The Indian rupee is going to grow in the coming months as the central bank will probably rise the interest rate and will allow currency’s appreciation according to Bank of America strategist.

This is not very popular scenario among the currency market analysts, but Bank of America and some other investment institutions think that the rupee will rise more than 9% by the year’s end and the India’s repurchase rate will be lifted from 7.75 percent to 8 percent on the next Reserve Bank of India meeting.

The growing inflation rate in India forces nation’s financial authorities to sacrifice exporter’s competitiveness. 7.57 percent inflation in India is one of the main driver for the rupee’s probable appreciation.

Yeo Han Sia, a strategist at Bank of America, spoke in an interview about the current situation with India’s inflation:

Currency appreciation is a monetary policy tool India will definitely have to explore in coming months… If you have a persistent overshoot of inflation, resulting in an erosion of market confidence over the central bank and the government’s credibility to fight inflation, then the issue that develops is much more serious.

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CAD Down before Central Bank Meeting

The Canadian dollar was falling slightly yesterday and today against the other world currencies as the traders expected the interest rate decision of the Bank of Canada monetary policy meeting, which is scheduled for 22nd of April.

The total drop of the Canadian dollar (or so called Loonie) against the U.S. dollar this year is at 1.6% after a 17% gain last year. The drop increased this week as the Bank of Canada is expected to lower the key interest rate from 3.5% to 3.0% on its meeting today. The current interest rate in U.S. is 2.25%.

The market is expecting not only a 50 basis point cut in Canada, but also a statement that will support confidence in further cuts by the BoC.

The last interest rate cut was performed on March 4 — it was reduced from 4.0% to 3.5% and the statement signaled that the central bank has now entered a cutting cycle. The present consumer inflation rate in Canada is quite low, thus allowing more loose monetary policy.

USD/CAD rose from 1.0064 to 1.0072 today on Forex, while CAD/JPY pair declined from 102.59 to 102.37.

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